Trade Fundamentals: Rhetoric and Reality

The focus so far this week has been on the EU again. Mr Trump has made some agreements on tariffs, which includes benefits to the US to enable zero rates to both countries on non-auto goods. The question of auto tariffs is a big one for the EU and is not under this umbrella and rumours still abound that they will be imposed later this year. Just to be clear, they have agreed to a truce on auto tariffs but it is only on hold. Plenty to still speculate about and rock the boat in the EZ.

Today we have to wait again for Mr Draghi to step forward. Talk about tightening is what the market is listening for and any further clues since the last meeting when December 2019 was the goal for ending QE. A lot now rides now for the EUR on the tone and words of the chairmen and we could have some volatility.

Equities are again split…and consider also the longer-term effects on different sectors as tariffs globally take effect. That is not a subject for today but these divergences are likely to become much more common. For now, the US indexes are stronger across the board…also energy stocks were higher. I am still showing this on the weekly chart:

Asian markets are still weak:

And here is the Nikkei. after more talk from the BOJ about the benefits of higher long term yields.

The market movements have been much more about results with the technology stocks benefiting the most although Facebook disappointed yesterday.

That brings us to data. EZ PMIs improved on the manufacturing front and slipped on services..the opposite of last time and overall supportive of the EUR. Ths is not as important as the ECB today and any speculation around policy can move the EUR either way so wait for the news.

One other piece of data caught my news and it was more lacklustre numbers on US existing home sales and another slight miss. More on that at the weekend as we consider the picture for the USDX:

The Watchlist

I have been challenged by internet issues this week…but for long-term traders like myself, the movements have been narrow. My focus is still on equities and I am still holding the FTSE short. This is an attempt to position for longer-term movements to the downside:

EUR trades are waiting for Draghi: This is in a triangle

I prefer the EURJPY, fundamentally and I am looking to short it on any apparent softness in policy from Draghi:

The USDJPY is in the middle of nowhere and I prefer the lower break if risk-off conditions take control.

The yield had a surge following the BOJ rhetoric but has settled and still needs to be assessed for this trade..prefer the short side and the bigger levels:

The short on this worked well off the level given last week…now we wait as it is not far from another support level.

The risk environment is mixed and lacking clarity. The AUDJPY is also under watch but it too is in the middle of a balance and one to wait for the bigger level…I prefer the break lower:

Gold is on the list watching both the risk environment and the USD for weakness and the goal is to wait and get the timing right

The forex markets are quiet as we wait for the ECB and watch unfolding politics. Remember it is summer and liquidity is dropping so we need the best catalysts and one is just ahead with the ECB.

I shall be looking for any risk-off conditions which is one of my big themes. The other you know is equity markets and avoid the US indexes for now. The divergence means we have to know where to focus our attention. It also warns that there are bigger problems ahead. As if we didn’t know!

Judith Waker

Related posts:

None of the Forex Mentor Pro team nor its owners (expressly including but not limited to Marc Walton), officers, directors, employees, subsidiaries, affiliates, licensors, service providers, content providers and agents (all collectively hereinafter referred to as “Forex Mentor Pro ”) are financial advisers and nothing contained herein is intended to be or to be construed as financial advice

Forex Mentor Pro is not an investment advisory service, is not an investment adviser, and does not provide personalized financial advice or act as a financial advisor.

Forex Mentor Pro exists for educational purposes only, and the materials and information contained herein are for general informational purposes only. None of the information provided in the website is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, recommendation or sponsorship of any company, security, or fund. The information on the website should not be relied upon for purposes of transacting securities or other investments.

You hereby understand and agree that Forex Mentor Pro, does not offer or provide tax, legal or investment advice and that you are responsible for consulting tax, legal, or financial professionals before acting on any information provided herein. “This report is not intended as a promotion of any particular products or investments and neither Forex Mentor Pro group nor any of its officers, directors, employees or representatives, in any way recommends or endorses any company, product, investment or opportunity which may be discussed herein.

The education and information presented herein is intended for a general audience and does not purport to be, nor should it be construed as, specific advice tailored to any individual. You are encouraged to discuss any opportunities with your attorney, accountant, financial professional or other advisor.

Your use of the information contained herein is at your own risk. The content is provided ‘as is’ and without warranties of any kind, either expressed or implied. Forex Mentor Pro disclaims all warranties, including, but not limited to, any implied warranties of merchantability, fitness for a particular purpose, title, or non-infringement. Forex Mentor Pro does not promise or guarantee any income or particular result from your use of the information contained herein. Forex Mentor Pro.com assumes no liability or responsibility for errors or omissions in the information contained herein.

Under no circumstances will Forex Mentor Pro be liable for any loss or damage caused by your reliance on the information contained herein. It is your responsibility to evaluate the accuracy, completeness or usefulness of any information, opinion, advice or other content contained herein. Please seek the advice of professionals, as appropriate, regarding the evaluation of any specific information, opinion, advice or other content.

Marc Walton, owner of Forex Mentor Pro, communicates content and editorials on this site. Statements regarding his, or other contributors’ “commitment” to share their personal investing strategies should not be construed or interpreted to require the disclosure of investments and strategies that are personal in nature, part of their estate or tax planning or immaterial to the scope and nature of the Forex Mentor Pro philosophy.

All reasonable care has been taken that information published on Forex Mentor Pro website is correct at the time of publishing. However, Forex Mentor Pro does not guarantee the accuracy of the information published on its website nor can it be held responsible for any errors or omissions.